Piercing the Corporate Veil and the Organic Bond

The most important features of capital companies, alongside having a separate legal entity and separate assets, include the privilege of limited liability. These features have laid the groundwork for institutionalization, making capital companies the most prominent actors in commercial and economic life. In return for these generous privileges granted by law, it is assumed that the shareholders and managers of capital companies owe a duty to the public. Consequently, these individuals must manage the company in accordance with commercial laws, the articles of association, and other relevant legislation.

When judicial decisions within the scope of the "piercing the corporate veil" and "organic bond" theories are examined, it is clearly understood that shareholders or the parent company abuse one, two, or all three of these main features of capital companies, or conduct transactions in disregard of legal regulations. Claims regarding piercing the corporate veil and the organic bond are not limited solely to debt recovery cases; they are raised in a wide range of fields, from divorce proceedings and environmental and competition protection regulations to cases involving the bribery of foreign public officials.

Although the application of these theories is highly criticized by some authors, they are becoming increasingly widespread in all countries. These developments signal that, no matter how solidly the capital company system is built on legal and economic foundations, there are individuals and circumstances that attempt to abuse the system and prevent it from functioning as intended. The application of the aforementioned theories, therefore, assumes a preventive and supervisory role against these negative developments.